Abstract

   The commercial fleet market has been experiencing rapid change during the past five years, presenting new opportunities for fleet product and service providers. In 1995, Havill Consultants published the well-respected study entitled The DOE-EPA Regulated Commercial Fleet Market Fuels, Equipment, and Services Forecast, 1994 - 2000. Study findings indicated that fleet operators, reacting to EPA regulations, were planning to shift as much as five billion gallons of fuel from on-site refueling facilities to off-site retail stations. As fleets began to move refueling off-site, they also began to outsource fleet management activities.

   More and more businesses recognized that transportation was not their core function and therefore they should not assume the capital, administrative, and liability burdens associated with on-site refueling. The trend expands beyond fuel operations. Fleet operators are evaluating alternatives to in-house management of fleet operations, including vehicle maintenance, driver administration, and vehicle procurement. Some fleet managers have determined that certain financial risks can be minimized, or entirely avoided, by leasing fleet vehicles. As a result, automobile manufacturers, truck manufacturers, and leasing companies are all striving to provide fleet operators with increased convenience and control. Full service leasing programs offering an array of fleet services, including fuel and maintenance, driver licensing services, and consolidated billing, have emerged as vehicle lessors strive to be the fleet managers’ one-stop shop.

   Fleet managers are also re-evaluating their options for servicing and maintaining their fleet vehicles. Mobile maintenance and third-party on-site maintenance management are two recently emerging alternatives to on-site mechanics. Meanwhile, traditional OEM dealer and vehicle service centers are encouraging fleet customer loyalty by offering value added services including enhanced credit card programs, vehicle repair and inspection reporting, and consolidated billing. Successful automobile and truck manufacturers, fleet maintenance providers, leasing companies, and OEM and after-market parts suppliers will need to match their product and service offering with the needs of the fleet administrator.

   Unfortunately, marketing these products and programs to commercial businesses is complicated because there are many discrete sub-segments, such as government, utility, construction, service, and over-the-road fleets. Not only do fleet product and service providers need to understand how product and service requirements vary across segments, but they must also understand how fleet administrators approach their decision-making process. Since each sub-segment has different criteria for choosing a program or product solution, broad strategies are not as effective as programs targeted at the discrete sub-segments.

   Recognizing this fact, our clients again have asked us to investigate the commercial fleet market. Havill & Company research is based on comprehensive end-user surveys. Unlike generalists who manufacture reports by soliciting the opinions of industry experts, our interviews are conducted with fleet product purchasing decision-makers at the administrator level. In order to understand the information needs of today’s fleet product providers, issue ballots and questionnaires were distributed. Over eighty industry executives, including leasing providers and vehicle manufacturers, returned ballots illustrating the information that is most important to them. This prospectus, containing the research design and methodology, is the result of that effort. We at Havill & Company are eager to explore the opportunities of the commercial fleet market and welcome your participation in this important new study.

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Introduction and Research Overview

Regulations have forced many fleet operators to refuel off-site at retail petroleum stations.

• Has the move to off-site refueling created a trend of outsourcing other fleet services including maintenance and leasing?
• How many fleets will be using off-site maintenance services or other non-traditional methods?
• Which full-service leasing features are fleets shopping for?
• What effect will maintenance outsourcing have on the automotive after-market parts business?

   Increased fleet refueling at retail stations had an effect on the expansion of fleet management service providers and the outsourcing of vehicle services in the commercial fleet market. This increase was influenced by the closure of on-site refueling facilities in response to Federal UST regulations requiring corrosion protection. As fleet refueling operations began moving off-site, fleet managers looked for ways to outsource other fleet operations, such as vehicle procurement, maintenance, and parts replacement. As a result of these changes in fleet management, several companies began to provide new programs and products for the fleet market. The number of companies offering commercial fleet services has increased the amount of competition in the market. This competition has caused providers to look for ways to improve their fleet service programs. In order to improve these programs, fleet vehicle product and service companies have requested specific information on the commercial market. Havill & Company’s new research will help these companies take advantage of the opportunities in the commercial market.

   To take advantage of the opportunities, fleet product and service providers must make targeted marketing and programming decisions. These decisions need to be based on the different fleet business segments. The needs of individual fleets vary based on the characteristics of their business segments. This new research study will supply fleet product and service providers with the tools necessary for targeting specific business segments. This research will quantify the U.S. fleet population and its fuel consumption by ten business segments: agriculture, construction, government, long haul carriers, manufacturing, retail, service, short haul carriers, utility, and wholesale.

   As fleets vary according to size, business segment, and travel characteristics, they also vary in the way they make decisions. In order to capture the most business from the commercial market, fleet product providers need to understand the purchasing behaviors of fleet managers. What factors enter their decision-making criteria? Who makes the final decisions on which program to implement or product to purchase? In addition, fleet product providers need to understand the role of brand loyalty among commercial fleets, such as why fleets may always purchase the same brand of vehicle or why a fleet continues to use the same leasing program provider. Identifying the steps to building loyalty among commercial fleets will inevitably strengthen your fleet marketing efforts.

   Fleet administrators have indicated that the decision to outsource certain operations is largely based on cost and control issues. In the past, traditional fleet operations, such as maintenance of vehicles, have been performed in-house. Fleet managers have several new methods to choose from and must decide which method of maintenance is best suited for their business. Mobile maintenance and third-party on-site maintenance management programs have entered the list of available methods. Off-site vehicle maintenance facilities, specifically designed for commercial vehicles, are being constructed in several areas across the country. This research will provide information regarding where fleets have vehicle maintenance performed and their reasons for choosing that particular method.

   Another issue facing fleet managers is vehicle procurement. Commercial vehicle leasing programs are available that provide alternatives to purchasing vehicles. Vehicle leasing programs benefit fleet operators by eliminating the need to produce large amounts of cash to acquire vehicles and reduce the risk of owning outdated equipment. However, competition exists between leasing program providers. This competition requires leasing companies and auto manufacturers to develop the best-structured procurement programs for fleet managers. This research provides both leasing and auto/truck manufacturer subscribers with detailed information on what fleet managers expect from their procurement and leasing programs.

   Also affected by the outsourcing decisions of fleet administrators are the manufacturers of after-market and OEM vehicle parts. These businesses rely on the commercial fleet market as a primary source of business. Important issues to these companies include how often parts are replaced, where they are purchased, and whether parts replacements are scheduled or done as needed. To effectively answer these questions, market research is needed to gain an understanding of how fleet managers are currently handling the replacement of vehicle parts.

   However, market research conducted on the commercial fleet market is only one small piece of the opportunity puzzle. Havill & Company maintains a SQL database of eight million businesses that have one or more commercial fleet vehicles. This database is enhanced with data gathered from this research as well as your own business intelligence or proprietary research. For example, data such as vehicle consumption and maintenance expenditures can be attached to each record, allowing you to evaluate your market opportunity in a particular city, state, or region, and prioritize prospects. These databases can be integrated into relationship management software so that your direct mail or telemarketing campaigns are better targeted and more effective. These enhanced marketing programs, available through Havill & Company, will enable you to profile and acquire the best commercial customers for your fleet card program.

   Our reputation for developing accurate industry forecasts is a direct function of our proven methodology. Reliable planning information of this nature is only available through survey research with decision-makers responsible for deciding the fate of individual fleet product programs. National Petroleum News (NPN) began publishing Havill’s forecast of 1998 compliance statistics in their November 1993 feature article. NPN called the research "the most detailed analysis and outlook to date on the impact of the EPA's UST regulations on the petroleum marketplace." NPN continues to include Havill research data in its annual UST compliance articles.

   We are confident that this new research study will become the primary source of planning data for our subscribers to develop their fleet marketing strategies through the year 2001. In addition to price discounts, charter subscribers will participate in the study design and receive feedback from the project team during the course of the research. This ensures that information important to your company is covered in the research. The study, to be published third quarter 1999, will provide clients with the tools they need to adapt their businesses to the post-regulatory, commercial fleet market.

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Research Objectives of the 1999 Fleet Study

The primary purpose of this research is to provide an accurate analysis of the current commercial fleet market. Companies providing products and services to the commercial fleet market will now have an accurate benchmark of the industry for strategic planning purposes. In addition, the research will provide a forecast of changes in fleet refueling, maintenance, vehicle procurement, and management services through 2001. Overall, the primary objectives of the 1999 Commercial Fleet Market study are to:

• Understand the distinguishing characteristics of each fleet business segment, including agriculture, construction, government, long haul carriers, manufacturing, retail, service, short haul carriers, utility, and wholesale.
• Define unique segments of the U.S. commercial fleet population in terms of current vehicle demographics, including number and type of vehicles, ownership, travel characteristics, location, and fuel consumption to determine the product and service needs of fleet segments and potential new customers.
• Identify the vehicle procurement options and methods of financing that are of most interest to fleets. Determine the reasons why commercial fleet managers decide to lease or purchase fleet vehicles.
• Identify the types of leasing and fleet management programs and features that are most important to fleet managers, including full-service preferences.
• Understand fleets’ attitudes towards outsourcing. Understand fleets’ attitudes toward "bundled" or "choosing from a menu of" fleet management services.
• Understand fleets’ sensitivity to vehicle delivery times and of residual value perceptions.
• Identify what fleet administrators are looking for in terms of on-line vehicle procurement information and management reporting.
• Determine methods for attracting small fleet business to vehicle dealerships.
• Quantify the annual costs of maintaining fleet vehicles. Identify the maintenance methods utilized by fleets including mobile, in-house, and third-party providers. Identify interest in preventive maintenance tracking programs and satisfaction with current providers.
• Determine the market size and replacement schedules for fleet TBA merchandise (tires, hoses, brakes, batteries, spark plugs, filters) including scheduled/unscheduled replacements and equipment life expectancy.

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Methodology and Procedures

   Havill & Company has a proven track record of developing accurate industry forecasts for both syndicated and proprietary research. From our experience, the most reliable information source for predicting future technology trends and purchasing patterns comes from the end-users themselves. For this study, in-depth interviews will be conducted with over 1,000 fleet administrators. They will be asked detailed questions about their vehicle, maintenance, leasing, and refueling plans.

   In preparation for this study, Havill Consultants has conducted the necessary background research for achieving the study objectives. Primary information sources include government agencies and reports, as well as fleet and petroleum industry trade journals. This information was compiled into an issue ballot containing a list of objectives for the study. The issue ballot was sent to industry executives at automobile and truck manufacturers, leasing and insurance providers, auto parts suppliers, and major oil companies. Over 80 decision-makers returned the ballot with their feedback. The results of the balloting process yielded the objectives and issues for this study and were used in the design of the questionnaire.

   Our research follows a reliable methodology. The questionnaire will be pre-tested by conducting over a dozen interviews, analyzing the results, making necessary revisions, and then continuing the cycle until all of the necessary refinements have been made. This study will employ a stratified random sample of at least 1,000 fleet owners. The sample list will be obtained from a Dun & Bradstreet database of over eight million fleet operators. The sample will be stratified to the population geographically, by size of fleet, and according to the following business segments.

    As surveys are completed, they will be entered into Survey System®, our full-featured market research software program. Market survey data from each questionnaire will be computer tabulated and projected to the fleet population. Statistical procedures will be applied to establish the significance of the research findings.

    Havill & Company will personally manage all aspects of the project. Each of the professionals assigned to this project has extensive fleet marketing research experience. They will share responsibility for the total project including secondary research, questionnaire design, telephoning, analysis, and writing the final report. All study findings will be fully documented in a report of approximately 500 pages. Where appropriate, graphs will be used to visually support the analysis.

   Approximately one month after the delivery of the final report, Havill Consultants will be available to meet with individual subscribers to discuss issues arising from the completed research. Pending sufficient interest, a multi-client study conference may be held at which Havill Consultants will formally present the findings of the research and field questions during the presentation.

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Deliverables

   The final report will be based on the outline shown below. An executive summary will also be included. Approximately one chapter will be devoted to each major topic. Each chapter will discuss a particular objective and related data. Each subscriber will receive three hard copies of the final report. In addition, each subscriber will have access to the document via the Havill Consultants Internet site. This capability is particularly helpful for companies that would like to share the research information with managers and offices at multiple sites.

Overview and Report Layout Executive Summary Introduction and Overview Major Issues Methodology and Data Sources Summary of Fleet Market Forecast Fleet Market Characteristics Number of Fleets Number of Vehicles by Class Automobiles Light Duty Trucks Medium Duty Trucks Heavy Duty Trucks Tractors Buses Off-road Vehicles Trailers Travel Characteristics Local Regional National Vehicle Ownership Leased Owned Vehicle Base Location Home Based Dispersed Segmentation Agriculture Construction Government & Public Owned Long Haul Carriers Manufacturing Retail Service Short Haul Carriers Utility Wholesale Interest In Outsourcing Fleet Operations Use of On-line Services for Fleet Management Fleet Leasing Programs Number of Fleets that Lease Vehicles Number of Vehicles Leased by Fleets Leasing Provider Used and Length of Lease Type of Lease Financial Full-Service Lease Administrative Certification Driver Programs Fuel Insurance Maintenance Reporting and Billing Comparison of Fleet Leasing Programs Renting of Supplemental Vehicles Fleet Maintenance Programs Preventive Maintenance Services Tracked Maintenance Tracking Methods Used Annual Cost of Preventive Maintenance Maintenance Methods Used by Managers Mobile In-house Third Parties Preventive Maintenance Intervals In-house Vehicle Parts Inventoried Satisfaction with Maintenance Provider OEM and After-Market Fleet Industry Parts Characterize Replacement Frequency Batteries Belts Brakes Filters Hoses Spark Plugs Tires Characterize Replacement Habits Scheduled As-needed Purchase Location for Replacement Parts   Automobile and Truck Characteristics Identify Typical Turnover of  Vehicles Characterize Replacement Habits Location of Vehicle Purchasing and Leasing Financing of Vehicle Purchases Forecast of Fleet Market Size Perception of Vehicle Residual Value Order to Delivery Time Attitudes Procurement of Vehicle Add-ons Fuel Consumption in the Fleet Market Motor Gasoline Total Market Size Total Gallonage Facility Type Octane Level Consumption by Vehicle Type Consumption by Fleet Market Segments No. 2 Diesel Total Market Size Total Gallonage Facility Type Consumption by Vehicle Type Consumption by Fleet Market Segments Alternative Fuel

Commercial Fleet Refueling Options Consumption by On-site Methods UST Refueling AST Refueling Mobile/Wet-hose Refueling Consumption by Off-site Methods Retail Cardlock Truck Stop/Travel Plaza Identification of Needs and Features of Fleet Refueling Facilities Refueling Facility Needs Merchandise Offerings Methods of Payment Accepted Petroleum Equipment Offerings Physical Facility Attributes Vehicle Services Distance Expected to Travel to Off-site Refueling Facilities Quantification of Fleet Fuel Gallons by Payment Method Cash Credit Card Fleet Bank Oil Paper Account Voucher Reason For Choosing Primary Method Fleet Card Program & Billing Features Card Security Features Instantaneous Card Lockout PIN Access Required Customer Service Features 24 Hour Support Emergency Road Service Site/Station Directories General Merchandise Features Auto Rental Food General Merchandise Lodging Maintenance Product Lockout Features Fuel Allocation Limits by Driver/Vehicle Fuel Grade Purchase Location Time/Day Billing Features Tracking by Card Tracking by Driver ID Tracking by Vehicle Exception Reports Fuel Grade MPG Exceptions Manual Transactions Weekend Sales Other Billing Features Cost Tracking Mileage Based Information Tax Tracking Report & Billing Statement Options Billing Cycle Payment Methods Billing Methods including Internet Program Fees and Discounts Average Number of Card Programs Used Use of Integrated Cards Satisfaction with Card Provider Marketing Channels Used for Choosing a Fleet Program Comparison of Fleet Card Programs Fleet Marketing Tools Fleet Data Information Sales Force Automation Programs Market/Site Analysis Programs Direct Mail Campaigns Appendix

Note: The specific final report outline is subject to change based on survey results. This outline is the basis for the intended final deliverable.

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Who will Benefit From The Study

   This study grew out of requests by our clients for industry statistics and forecasts to drive their business planning and project development activities. During the design phase of this research, we discovered that companies had information needs specific to their businesses. Information on fleet market structure and demographics were of interest to fleet marketers and fleet product providers alike. Additionally, there was a demand for forecasted commercial fleet market opportunities through the year 2001.

Providers of Fleet Maintenance and Leasing Programs

   It is critical that providers of fleet leasing and management programs understand the new demands placed on their businesses as a result of structural changes in the commercial fleet market. This research will equip providers of leasing and fleet management programs with the knowledge they need to make decisions about their fleet programs, relative to the competition. A variety of issues will be covered, such as the structure and demographics of the fleet vehicle market, leasing program options, and available fleet maintenance methods. This information will allow companies to tailor their strategies to meet the changing demands of the fleet market.

• Why are fleets choosing to lease vehicles as opposed to purchasing vehicles?
• What specific leasing or fleet management features are fleet managers shopping for in leasing contracts and management programs?
• Why are some fleet managers interested in "bundling" services as opposed to using multiple suppliers for services?
• What type of on-line leasing program information, management reporting, and other services should my company provide?

   This research was designed with the above issues in mind. The research study will become a primary source for detailed information on the number of fleets, the number of vehicles, and vehicle ownership in the commercial market. Data will also be collected on other topics, such as number of fleets leasing vehicles, number of vehicles leased by fleets, and methods of financing. This information will allow leasing and fleet management program providers to develop long-term strategies that match fleet managers needs and desires in order to differentiate themselves from the competition.

Automobile, Truck and Vehicle Parts Manufacturers

   Automobile and truck manufacturers should understand the practices of commercial fleet managers regarding vehicle procurement. This research will provide automobile and truck manufacturers with detailed information regarding the structure and demographics of the fleet vehicle market and the primary procurement practices of commercial fleet managers. Equipped with this knowledge, manufacturers will be able to make decisions on how best to match their fleet program offerings with the needs of the commercial fleet manager.

• What is the expected demand for new vehicles? How will the demand be broken out by type of vehicle? Through which methods of procurement do fleets purchase or lease vehicles?
• What is the typical turnover in years and miles for fleet vehicles?
• How do fleet administrators rank my competition in terms of residual value?
• What specific leasing or fleet management features are fleet managers shopping for in leasing contracts and management programs?
• How sensitive are fleet administrators to order to delivery time? At what point would they switch suppliers?
• What type of on-line leasing program information, management reporting, and other services should my company provide?

   The research study can be utilized by subscribers as a reference source of information on the number of fleets, the number of vehicles, vehicle ownership, vehicle procurement practices, and vehicle turnover. The information contained within the study will allow auto and truck manufacturers to plan for changes in fleet product demand and help to distinguish their fleet products from other manufacturers in the commercial fleet market.

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Vehicle Parts Manufacturers and Maintenance Providers

   Vehicle parts manufacturers should understand how fleets replace vehicle parts and maintain their vehicles. This research will provide vehicle parts manufacturers and maintenance providers with detailed information regarding the structure and demographics of the fleet vehicle market, the vehicle parts replacement activity of commercial fleets, and the vehicle maintenance practices of commercial fleet managers. Equipped with this knowledge, manufacturers will be able to make decisions on how best to match their fleet program offerings to the needs of the commercial fleet manager.

• What is the average replacement frequency and habits for fleet vehicle parts? Are these parts replaced on a schedule or as-needed?
• What is the life expectancy for specific (TBA) parts?
• How many fleets will be maintaining their vehicles off-site or on-site? How often are vehicles being maintained? How satisfied are fleet managers with their maintenance providers?
• What are the annual preventive maintenance costs for fleets? How are maintenance and repair expenses tracked?

   The research study can be utilized by subscribers as a reference source of information on the number of fleets, the number of vehicles, vehicle ownership, fleet maintenance practices and budgets, and vehicle replacement practices. The information contained within the study will allow vehicle parts manufacturers and maintenance providers to plan for changes in fleet parts purchasing and maintenance practices to help distinguish their fleet products and services from other competitors

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Timetable for Subscription

   The purpose of syndicating this research is to provide our clients with robust market research while sharing the cost with other industry participants interested in becoming charter subscribers. In addition to price discounts, charter subscribers have the added advantage of providing design input to the research questionnaire. This ensures that the issues important to your company are included in the research.

   About three weeks are provided for evaluating the prospectus and returning the enclosed purchase agreement. Clients wishing to participate in the study design should respond by June 4, 1999, the date all questionnaires will be finalized. Charter subscribers will be permitted to suggest changes to the proposed questionnaire as long as they do not materially increase the cost and scope of the research presented in this prospectus. Including design, survey, tabulation, and analysis, the research will take between 16 and 18 weeks to complete. Subscribers will receive three (3) copies of the final report. The commercial fleet market research schedule is shown below:

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Price and Payment

   To ensure that the study is thorough and complete, seven consultants have been assigned to the commercial fleet market research team. This team will be available for consultation and follow-up projects at the conclusion of the five-month project.

   The cost of this study will be $15,000 for charter subscribers submitting signed contracts with half of the subscription fee on or before June 4, 1999. After the June 4 deadline, the subscription fee will be $17,000. To subscribe, please fill in the purchase agreement and return one copy to us. We are confident you will find that we have earned our reputation for achieving significant, long-lasting results for our clients.

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Commercial Fleet Market Project Team

   Havill & Company consultants routinely conduct both syndicated and proprietary studies within business-to-business markets. We have performed in-depth studies of the commercial and retail petroleum market regarding fuels, equipment, and services. From this previous research, we have developed extensive databases of contractors, distributors, petroleum marketers, and commercial fleet operators. Some past research studies include:

• The U.S. EPA Regulated Retail Gasoline Service Station Market (Multi-Client 1998)
• Risk Managed Fuel Market Opportunity (Proprietary, 1997)
• The U.S. Retail Gasoline Dispenser Nozzle Market Study (Proprietary, 1997)
• Future Trends in Dispenser Technologies (Proprietary, 1997)
• Fleet Market Opportunity for Bundled Fleet Services (Proprietary, 1997)
• Canadian Petroleum Equipment Market Study (Proprietary, 1997)
• Fleet Market Potential: A Ranking of the Top 50 MSAs (Proprietary, 1997)
• Truck Stop/Travel Plaza Market Research Study (Proprietary, 1996)
• Emerging Retail Refueling Technologies (Proprietary, 1996)
• The DOE-EPA Regulated Commercial Fleet Market Fuels, Equipment, and Services Forecast 1994-2000. (Multi-Client, 1995)
• Leak Detection Market Research Study (Proprietary, 1995)
• Interstate Highway Strategy Analysis (Proprietary, 1995)
• Features & Benefits Study of Dispenser Accessories (Proprietary, 1995)
• The New European Petroleum Equipment Market For Gasoline Service Station Products and Services (Multi-Client, 1994)
• Sales & Marketing Effectiveness Tracking Report (Non-Competing Multi-Client, 1994)
• Stage II Vapor Recovery - Retail, Commercial, and Industrial Gasoline Service Station Markets, Analysis and Forecast (Multi-Client, 1992, 1993, 1994)
• Major Oil Company Trends, Stage II - POS - Fleet Programs (Proprietary, 1993)
• Automatic Dry Break Fueling System Fleet Administrator Study (Proprietary, 1993)
• Analysis and Trends, A Study of the 1992 Tank Market (Proprietary, 1993)
• The United States EPA Regulated Retail, Commercial, and Industrial Gasoline Service Station Markets, Current year - 1998 (Multi-Client, 1990, 1993)
• Stage II Vapor Recovery Distribution Analysis (Non-Competing Multi-Client, 1993)
• Underground Tank Retirement and Failure Rate Study (Proprietary, November 1992)
• Stage II Vapor Recovery Retail, Commercial, and Industrial Gasoline Service Station Markets, Analysis and Forecast (Multi-Client, 1992)
• Petroleum Industry Data Management & Control Systems (Proprietary, 1991)
• Retail, Commercial, and Industrial Gasoline Service Station Market Share Study for Petroleum Equipment (Proprietary, 1991)
• Petroleum Equipment Study - Retail, Commercial, and Industrial Gasoline Service Station Markets, 1990 Record - 1991 Outlook (Multi-Client, May 1991)
• C-store Market Opportunity for Petroleum Equipment (Proprietary, 1991)

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